Trade Credit Insurance for Manufacturers
Extending credit to customers is an integral part of every manufacturing business. Without credit, customers don’t buy, products don’t ship and you’re stuck idle. The simple truth is that every aspect of your business is touched by the use of credit – from your suppliers to your customers to your employees.
Customer credit ranges from simple arrangements, such as your delivering product to a client under “cash on delivery” terms, to much more complex situations. Yet all these functions of credit are geared toward a single purpose: increasing your accounts receivables. Credit is a fantastic tool for this goal, but it can be crippling when a payer defaults.
That’s why every manufacturer should consider trade credit insurance. Just like the credit functions it protects, trade credit insurance runs the gamut from simple situations (e.g. customer bankruptcy) to more complex scenarios dealing with foreign entities and laws. And like the credit stream it protects, the goal of coverage is very simple: to increase and preserve your accounts receivables.
When providing customers credit, it’s important that your business gets paid in full and on time. One significant default can immediately restrict your ability to offer credit to all your other customers. This ripple effect can cause lost sales from even your most consistent customers. Essentially, trade credit insurance isn’t just protection for you, but serves as protection for your customers, too.
Beyond just protection, trade credit insurance can help you identify and retain key customers. The insurance carrier will review the associated risk factors. In this case, that means monitoring the financial capabilities of your customers, serving as a “first line” of pre-qualification and preventing credit problems before they happen.
Trade credit insurance is available for special circumstances and as a “company-wide” safeguard. It can be purchased for both domestic and foreign transactions and gives the security you need when extending credit to new and established customers. Further, it can become an integral tool in your own financing program as having your accounts receivable insured makes them stronger collateral.
Extending credit to clients puts you on the path to growth, and trade credit insurance makes sure you get there. If you have additional questions regarding how this coverage helps minimize your risk, ask an ‘A’ Team member today.
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